Bank Seasoning Requirements

I receive a lot of questions on no seasoned refinances and seasoning requirements from banks. This should help people understand a little more about this:

Banks come in two broad types: 1) Those that sell their loans on the secondary market and 2) Those that keep their loans to themselves.

Definition:
Seasoning: How long you have paid on the loan or owned the property. For example: If I have paid 7 months of a loan I could say I have 7 months of seasoning. If I have paid 3 months on the loan I could say I have 3 months of seasoning.

Here is an example of Secondary Market Sales and Seasoning requirements:

If a bank, such as Wells Fargo, creates a loan they will package the loan with other loans and sell this package to other institutions. The largest institution that purchases loans in the U.S. is FHA. They buy more loans than everyone else combined. They purchase in the area of 80% of all loans. Because of this FHA make the rules.
If I am Wells Fargo and I intend to package and sell loans I am going to create a loan that I have the highest likelihood of selling. So...if FHA says they will not purchase any loans that do not have at least 12 months of seasoning, I, as Wells Fargo will not create a refinance loan that has at least 12 months of seasoning.

Here is an example of banks that keep their own loans and their seasoning requirements:

If I am a local banks such as Southern Community Bank and I create a loan but never intend to sell the loan on the secondary market, or FHA, I don't really care what seasoning requirements are out their. I get to make my own rules. If I want to ask for 12 months in seasoning I can. If I will allow people to do refinances without any seasoning I can. Why? I, the local bank, plan to keep the loan. Again, I make the rules.